Elasticity of Demand -

Elasticity of Demand -

  • Elasticity of Demand
    • A measure of how consumers react to a change in price
    • In-elastic Demand - demand will not change or will change very little regardless of price
      • "needs"
      • few to no substitutes
      • Ex: water, milk, soap, insulin, gas
      • E < 1
    • Elastic Demand - demand will change greatly if there is a change in price
      • "wants"
      • there are substitutes
      • Ex:  soda, steak, fur coat
      • E > 1
    • Unitary Elastic -  in a perfect world, E = 1
  • Calculating Price Elasticity of Demand
    • Step 1: Quantity
      • (New - Old) / (Old)
    • Step 2: Price
      • (New - Old) / (Old)
    • Step 3: PED 
      •  absolute value of  (%△in quantity) / (%△in price)

Comments

  1. Bb's BlogFebruary 5, 2018 at 7:18 PM

    I think giving an example problem for calculating price of elasticity of demand for each scenario- inelastic, elastic, and unitary- and actually showing how you solved it would be very helpful for those who don't know how to solve it or are new to the topic.

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